More Lending Changes

This Tuesday February 26th I received an e-mail with information regarding program changes concerning 100% financing. It seems the MI (Mortgage Insurance) Companies will know longer ensure borrowers below 680 needing 100% financing. In fact in order to get financing above 80% anymore you need a minimum of a 620 and that will take you to 97%. Why are these changes happening? The lenders are not the culprits in this, the MI companies such as, AIG, MGIC, and United Guaranty are not willing to ensure borrowers anymore over 80% unless they have a 680; therefore the banks/lenders cannot lend the money to the borrowers above and beyond that amount.

I do think as the "credit crunch" and "mortgage meltdown" become more isolated and "seasoned" the standards will relax again, however only time will tell when and for how long. Most of what we are seeing in today's market is overreaction to underlying problems. But just like any other dilemma just give it time and we will see things get back to normal. With all of this being said there are still a lot of programs out there specifically designed for "first time home buyers" that will allow for 100% financing below this guideline. For instance, MHDC (Missouri Housing Development Corp.), USDA financing or "rural development" financing and FHA (Federal Housing Administration) financing just to name a few.

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New Media Player!

Professional Mortgage Group, Inc. has added yet another addition to www.pmg-inc.net.
This is the use of an online Media Player. We utilize this tool in 2 different ways.

1. We use this tool to update our visitors on current market conditions and what to expect. You can expect a quick synopsis of any daily news and how it has impacted the bond and rate market. From this info you can form your own opinion if you think floating or locking your rate is best for YOU! This also helps set expectations for clients and realtors!

2. We update you or your client's online loan status.
This allows us to give voice updates and the ability to touch on critical points pertinent to the loan. While we still encourage anyone to call and talk to us directly, this is just another way to provide you with easy information. No need to spend time playing phone tag if it isn't necessary. Realtors are no doubt busy dealing with other client's and working on closing new deals. We want to make the process as simple as possible! By referring your clients to PMG, you know all of the hard work is done. We will keep everyone up to speed right up until closing!

This is just another way PMG has chosen to go to new lengths to enhance the client, realtor, and lender relationship!

If you are in the market or have clients in need of fresh information, be sure to check back daily!

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"Your Columbia, MO Mortgage Broker"

Mark Your Calendars, Thursday March 6th!

With the volatility in the market place and the volume of phone calls and e-mails I have received concerning mortgage rates I thought it would be wise to hold a forum to address the current mortgage rate environment. The event will take place Thursday March 6th at The Columbia Board of Realtors from 11:30-1:00; lunch and refreshments will be provided!

As many of you know I follow the market as much if not more than any other mortgage professional. Why? Because I want my clients and referral partners aware of what is taking place in the market and how it impacts the real estate community and in particular mortgage rates. It is not a science I developed overnight. However, this is/was driven more by 10 years of experience in the lending industry, tracking MBS's, Bond's, Yield's, market sentiment, accessing information, interpreting information and correlating all of this into a "precise assumption" on the market and mortgage rates!

I will open my thoughts, knowledge and views on this subject to REALTORS ONLY during the forum on March 6th! I look forward to seeing you there.

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Under Promise and Over Deliver!

I am sure we have all heard the expression "Under Promise and Over Deliver". It could never be more important that right now. With rates dropping recently and jumping back and forth, many people have come out of the woodwork to refinance or purchase a home. This is great news for the mortgage and real estate market, but borrowers need to be on their toes. If you have paid any attention you can see the market is extremely volatile. This means when you are quoted a rate you need to confirm the following:

1. Is the rate realistic with the current day's market?
2. What are your closing costs?
3. Is this rate locked or floating?
4. What is the current market projected to do leading up to your closing?

These are all very important details. We are finding that many lenders are quoting rates based on what they think they can get in the near future or telling the customer what they want to hear! This is setting yourself up for failure. Now it is common to start a refinance at a rate on a given day and then have the market turn before the loan can be locked. In this case the borrower just needs to be made aware that the market must be carefully monitored so any sudden rate drop can be capitalized on! Either way I think you get the point. If a lender is up front and quotes a rate, it is always best to set the appropriate expectations. By doing this you don't put yourself in an awkward position and the borrower is taken care of in the proper way! Why put yourself in a position where you do all the work and the deal blows up at closing as a result of you telling a borrower they will get x when they actually can only get y!

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Beware, Worse Conditions May Come!

The Fed released it's minutes yesterday and true to many expectations they are very concerned about the inflation numbers being released; .3% of latest note. What impacts inflation? Well a host of items called "a bag of goods" sampled by the CPI index. Two of the main factors contributing to this index are Oil (closing at a record high 1 day ago above $100 a barrel) and Food costs (Wheat and Corn demand has really shot up lately) and Milk is approaching the ridiculous range! Why are these so closely monitored? Because these are the KEY ingredients to the "bag of goods".

Now with that being said traders have refused to put money into bonds until late yesterday and early this morning. What do they do with their money when in panic mode? One of two things happens; they either stash their money into Gold currently trading at an absolute ridiculous $948.00 an ounce or "put it under the mattress" (i.e. a money market account). Therefore bonds have really taken a hit the past week raising rates over a 7 day period faster than any other period over the last 10 years. Hopefully this trend has changed today as we are seeing traders put money back into bonds even though inflation is on the rise (inflation is VERY bad for any fixed asset avenue).

What does all of this mean? The Feds mentioned in their report that "if necessary and likely" they would continue their rate cuts. However, they also mentioned that once the economy got back on track they would raise them VERY fast to help curb the growing inflation problem. Why? Because we need a strong dollar to function in a "normal" economy and inflation simply put weakens the value of "our" dollar.

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More News on Foreclosures

After blogging on the newly announced "Project Lifeline" and talking about "Hope Now", more data is being released. This data is very disturbing, but touches on the fears I mentioned in our earlier blog. This is that even though people are taking advantage of these programs and modifying their mortgages, they are still losing their homes. I am not going to bore you with stats, but it was reported that a very high % of homeowners that took advantage of these programs still cannot afford to stay in their homes. If they catch up now, it is a blown transmission away from falling behind again. This is because there are so many people "married" to their home. Selling isn't an option, what do they do? Foreclosure is the next option. Even though these lenders are participating in these programs, the options available are temporary fixes. Rolling you past due balance into the loan, freezing an interest rate, and giving you more time to catch up are options that are on the table. If this doesn't make sense, just look at the following examples.Conforming ExampleA family purchased a $400,000 home and took out a 100% mortgage. They took out an ARM at 4.5%. Their payment was $2026 (principal & interest). When their ARM is up their payment could jump to $2271. This still isn't too bad. Then next year it goes to $2528. Now it is getting out of hand. This is $500 more a month than the initial month! The reason so many are getting into trouble is because the initial payment was a bit tight for them. This new increase is too much to handle.Non Conforming ExampleThe same family buying a $400,000 home on the non-conforming side is way different. This is where the majority of the problems stem from. An ARM rate would look more like 6% for a good non conforming borrower. This payment would be $2398. Once the ARM is up this payment jumps to $3218! That is an $820 jump in the first adjustment year alone! From these 2 examples you can see the problem. In reality the only way to help people is to drastically drop rates, extend terms, or reduce balances. All of these are unlikely scenarios. In actuality it may not be a bad idea. They stand to lose alot of money on a foreclosure, not to mention the hassle of dealing with numerous homes. If they reduced balances and modified loans in this fashion, many people could benefit. While this sounds like an easy solution, it is much more complicated. There are investors involved and there is the likelihood they reduce the balance, cut the rate, and still run the risk of not being paid! Then they lose twice! Nevertheless some serious changes need to be made and made fast if they want to help fix this growing epidemic!Brought to you by:Professional Mortgage Group, Inc."Your Columbia, MO Mortgage Broker"

Market Mentality Gone Wrong

I thought I had seen it all until today. Traders (on the stock market that is) have taken a leap of faith into an entirely different area called psychological nightmare! News that Wal-Mart profits rose in the 4th quarter 2007' have made the traders delirious. It simply baffles me how this could be seen as a sign of economic strength? To me the rational is simple; Americans are "cashed strapped" and in turn chose to buy their merchandise at the world's largest discount retailer! The lowest prices at the largest discount retailer for cash savvy people, wow what a concept. The struggling specialty retailers posted VERY disappointing sales over the holidays and moving forward. Is this a coincidence? Not too mention that 25% of this increase was from Wal-Mart's overseas locations, a huge push for them in 2007'.

In turn this has turned out to be another nightmare day for mortgage rates with the 10 Year Treasury Yield approaching 3.9% (the highest in the last 2 months) and MBS (Mortgage Backed Securities) down 112 bps for the day! Hopefully the economic data being released starting tomorrow will greatly help mortgage rates; only time will tell.

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Your Columbia Missouri Mortgage Broker

Economic Data Release Week Beginning 2/18/08

Even though this upcoming week is a short week we still have some key data being released that will affect the market and in turn mortgage rates. Below is a list of the pertinent data coming out this week.


2/20 at 8:30am: Jan CPI Previous: .3% Forecast: .3%

2/20 at 2:00pm: Jan FOMC Previous: - Forecast: -

2/21 at 10:00am: Weekly Jobless Claims Previous: 348K Forecast: 355K

2/21 at 10:00am: Jan Economic Indicators Previous: -.2% Forecast: -.1%

2/21 at 10:00am: Feb Philadelphia Fed Survey Previous: -20.9% Forecast: -10.0%


Let's see what this week holds and take advantage of President's Day!

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Mortgage Rates & Reading Between the Lines

I have received numerous e-mails and phone calls the past week concerning my opinion of the mortgage market and in particular "What will rates do"? Believe it or not some of these calls have come from other lenders, imagine that! Of course I do not and will not give my opinion and expertise to just anyone they have to be a client or referral partner otherwise what's the point; my biggest advantage above my competition is that they do not have me, and what's the biggest advantage to the realtor? They get to use my knowledge to help attain the best possible product, rate and advice concerning the mortgage process for "their" client.

Are you dealing with someone who knows how to monitor the market, do they get in early, do they stay late (in order to monitor "after hours" sentiment and yes that does happen), do they know how to read between the lines etc. By no means am I an expert and yes I make mistakes however, predicting the market is not a science and errors happen everyday but what I can say is that I have a lot more success than failure.

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Whirlwind of Mortgage Rate Changes

Wow, 3 weeks ago on a Wednesday we had a 25-45 minute window where 30 year mortgage interest rates were at 5.25% and now we are at 6.125%! Can you tell my frustration? In my opinion the market (Dow & Nasdaq) are extremely overpriced given the current economic conditions. It almost seems that traders are willing to perceive any and all data as good, when in reality if you read between the lines may not be as such. Therefore over the past 2.5 weeks we have seen a continued escalation in mortgage rates. I bet this is good for people wanting to buy homes?

It seems the Fed is really more concerned about helping banks and struggling consumers rather than "potential" consumers of inventoried homes. Now with that being said I am very much in favor of most of the policies the Bush administration and The Fed have enacted but it has really taken mortgage rates for a ride lately and we are on the upward slope of the "roller coaster" ride. Be prepared for the continued volatility as we move forward!

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Project Lifeline

Keep your eye on the news today. They are to be announcing a plan called "Project Lifeline".
This plan is being put into place to help the mortgage crisis. Lenders such as Countrywide, Bank of America, Washington Mutual, Wells Fargo, Chase, and Citigroup are a part of the program.
These lenders are reportedly set to work with distressed homeowner's to try and catch up on their overdue mortgage payments. This would call for a 30 day freeze for anyone that is 90 days late on their mortgage. This will stall the foreclosure process and allow more time to negotiate terms to save their home! The difference with this plan is that it is not only for Subprime borrowers! This is for all mortgage holders! All of these lenders are currently in the HOPE NOW program that freezes ARM rates for subprime borrowers. They are being urged to extend this to conventional borrowers.
Only time will tell if all of this will help. The problem is that unless some serious payment modifications are made to these problem loans, it may only be a matter of time!
This program will no doubt help many people and I am all for it! I just hope people don't sit back and relax and think this will solve their problem. The fact is for many of these people, they cannot afford the home they are in. They are stretched way too thin and all it will do is take another bump in the road and they are right back to playing catchup!

Keep your eye on the news today and more information on this program goes public!

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"Your Columbia, MO Mortgage Broker"

Education and Communication A Key to Success!

I wanted to talk a little about performing your "due diligence" as a mortgage lender to protect both yourself and your clients. In this day in age where foreclosures are at all time highs, delinquencies are on the rise and the escalation for government involvement is heightened; are you doing your job to protect your integrity? I can say we at Professional Mortgage Group are! Following are just a few items that we do to educate and communicate with our clients to ensure a smooth, honest and ethical transaction.

1) We personally meet with every client: We do this to both make the client comfortable with talking and communicating with us and to go over (in detail) the loan in general and their responsibilities and our responsibilities. If there are any issues now is the time they are both addressed and brought up!

2) We verify the information given to us: We have seen too often in this business that the information given in connection with an application is not entirely correct. How? Basically for two reasons, they simply do not or they are concerned about qualifying for the loan in the first place. By verifying the data provided it makes the lending process easier for everyone involved and if we find any discrepancies we can address them before hand, hence not holding up a closing at the last minute.

3) We hand out Buyer's Guides: This informational handbook helps the client understand what we do and what they are responsible for. It also addresses FAQ's in case questions come up after the fact.

4) Home buyer's certification course: If you are a first time home buyer and are doing business with Professional Mortgage Group, we require you to take an on-line education course! We find this course to be very helpful in preparing are clients for the tasks of homeownership.

5) Certification Disclosure: We require all clients to sign a form that they were A; given copies of all disclosures assocaited with their home loan and B; they were given a thorough explanation of all documents and had any and all questions answered in connection with their financing. By doing this we feel at ease with our clients and they feel at ease and trust us!

6) We perform a Benefit to Borrower Test on every file: This ensures that the client gets the best possible product, terms and costs associated with their mortgage financing!

7) We simply do things the right way: From our first conversation to the closing table we give honest, ethical and professional advice and recommendations. We back this with Service Guarantee's, results and client testimonials!

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Does Your Mortgage Broker Earn Their Paycheck?

We've talked about this in the past but in light of a couple of stories I heard I thought it wise to revisit the situation. How do you know whether or not your broker is earning his or her money? Whether your doing a refinance or a realtor monitoring your client's purchase transaction, each transaction has it's own set of hurdles however, that does not relinquish the broker from doing their job to the fullest earning every penny they take. I can say with 100% certainty that myself and the staff at Professional Mortgage Group, Inc. earn every dime! Why am I so certain? Because I know in my heart that our clients were given the best possible product, rate, terms, fees, advice and expectations from day one! Following are a couple of "highlights" on things that I think are critically important to earning your money.

#1) Expectations: These can be the downfall to any transaction or can be the lifeline. We must set fair, honest and realistic expectations from day 1. For instance, the "unkowns" during the transaction, time frame constraits, documents needed, the process etc.

#2) Research: Do you know what the market is doing and I am not speaking to the fact of the Dow, Nasdaq, Bonds etc. Do you know the data coming out and how it will affect investors perceptions and hence rates. Do you know where to look and how to analyze this data to give good advice to your clients

#3) Guidelines: Are you familiar with the best possible products and the guidelines that go with them. Do you know what your competition has so you know if you have a product that will compete or even better be more advantageous? Have you prepared your client for possible guideline changes that could happen during their loan process?

#4) Time Frame: Have you met the time line set-forth in the contract or that you have given your client (should it be a refinance transaction)? Have you alerted them to the possibility (early on) of issues?

#5) Disclosures: Did you sit down with your client and go over every little detail? Did they ask questions, did you prepare them, were they prepared?

#6) Above & Beyond: Do you go above and beyond what your clients expect, what your realtors expect and what you expect? This is what sets you apart from everyone else and is the determining factor in earning your money. It could be as little as meeting your clients at home to pick up documents so they don't have to make the trip or as big as helping them prepare a budget and all that entails.

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Boone County Missouri Housing Statistics for 2007

I was doing some web browsing yesterday, I do this at least 1-2 hours a day to stay up on local, regional and national market data and noticed that The Columbia Board of Realtors had the Final 2007 housing results; so in case you missed it here are some of the highlights.

• June looked to be the best month of 2007 with 288 homes sold.
• Over the past 5 years the 2nd Quarter has proved to be the best every single year
• A total of 2,110 homes were sold last year that's 202 less than 2006 and 358 less than 2005 sales.
• New construction still feels the chill of the housing slump as only 416 homes were sold in 2007 as oppossed to 580 in 2006 and 617 in 2005!
• New construction volume was $88.3M far less than the $121.9M in 2006 and $122.8M in 2005.
• Existing home volume was $284.3M in 07 very strong against 2006's $284.7M.
• The average sale for new construction was $212,308 as oppossed to $210,196 in 2006.
• The average sale for existing was $167,848 as oppossed to $164,390 in 2006.
• The "hottest" area continues to be the Southwest with 579 homes being sold in that area a trend that has continued for the past 5 years.

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A Big Week of Economic Data Revisited!

I thought I would revisit last Monday's post on economic releases and the actual results as compared to the forecasts.


1) Dec. New Home Sales: Previous: $647K Forecast: $635K Actual: $604K

2) Jan. Consumer Confidence: Previous: 88.6 Forecast: 88.0 Actual: 87.9

3) 4th Quarter GDP: Previous: 4.9% Forecast: 1.1% Actual: .6%

4) FOMC Rate Decision: Previous: 3.5% Forecast: 3.0% Actual: 3.0%

5) Dec Consumer Spending: Previous: 1.1% Forecast: .3% Actual: .2%

6) Weekly Jobless Claims: Previous: 301K Forecast: 315K Actual: 375K

7) Jan Unemployment Rate: Previous: 5.0% Forecast: 5.0% Actual: 4.9%


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Crazy Mortgage Rate Market!

I just wanted to talk briefly about the volatile rate market the mortgage industry is experiencing right now. Rates are going up and down so fast it is very tough to stay on top of. We have experienced days that have endured 5+ re-prices! That means we can quote a rate to you in the morning and if it is not locked, it changed 5 different times! Just imagine how that can make the lender and the client feel. With this being the case, we are extremely cautious about the rates we are quoting. Our goal is absolutely no surprises. While we cannot control the market, we can help you set your expectations. This way you are ready for the ride. If you are someone who wants to lock right away, we can do it. Many want to wait and try and catch the market on a down day to lock. This is fine too, just be aware it can sometimes be tough to get the lock request in. A couple weeks ago, rates dropped so low that an enormous amount of lock requests were attempted and re-prices hit before thousands of loans across the country were able to be locked. There simply was not enough time!

I don't bring this up to scare anyone! Just be aware of this volatility. This way we can consult with you and find out what your goals are and your tolerance level.

We also want everyone to be aware of the increased turn time it is taking lenders to get loans closed. Refinances are extremely backed up! If you are thinking of refinancing you may want to get started. This way you have plenty of time for your loan to work it way through the pipeline! The further along you are in the underwriting process, the more favorable pricing you will receive when the market does dip!

Your comments and questions are welcomed!

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"Your Columbia, MO Mortgage Broker"